The outgoing cabinet has given the Bill to modernise non-compete clause published for consultation.
Competition clause
It is about the competition clause which is included in employment contracts with employees (Article 7:653 of the Civil Code). Such a clause prohibits the employee from carrying out (similar) work after the termination of the employment contract, at another company or as a self-employed person. It is estimated that around one-third of employment contracts concluded include a non-competition clause.
An alternative to the non-compete clause is the non-solicitation clause. Then employer and employee agree in the employment contract on how to deal with the customers (and other relations) associated with the ex-employer after the termination of that contract.
Restriction of freedom
A non-compete clause in an employment contract represents a restriction on the free choice of employment enshrined in the Constitution. Research has shown that a non-compete clause is too often included in an employment contract by default. Even when it is not necessary in connection with the protection of the employer's business. The number of employment contracts that include a non-compete clause has doubled in a short period of time.
If the bill is introduced, as it was given in consultation, a non-competition clause in an employment contract will be null and void except if:
- the in writing has been agreed with an adult employee;
- from the written justification included with the clause:
- during which period after the termination of the employment contract, the clause applies (maximum 12 months);
- for which geographic area the clause applies;
- because of which important business or service interests the restriction is necessary.
The employer must invoke the non-competition clause in writing no later than one month before the end of the employment contract (in case of summary dismissal or dissolution by the subdistrict court: within 2 weeks after the date of termination/judgment of the subdistrict court). If the employer does not invoke a non-competition clause included in an employment contract, that clause does not apply.
The employer invoking a non-competition clause owes the employee compensation for each month the restriction lasts. This compensation amounts to at least half the monthly salary (a higher compensation may of course be agreed). This compensation must be paid no later than the last day of the employment contract. If the compensation is not paid on time, the non-competition clause has no effect.
Transitional law
Competition clauses agreed before the new rules come into force will remain legally valid even if the geographical scope and overriding business interest are not set out in writing in the employment contract. The other new provisions do apply. This means that in the case of an “old” non-competition clause, the employer must invoke the effect of this clause in good time and owe the compensation described above. An “old” non-competition clause can be invoked by the employer for a maximum of 12 months (or the shorter period stipulated in the employment contract).